Oil up slightly, low U.S. inventories weigh on high rig counts

Islands that are used for pumping oil are shown just offshore in Long Beach, California, U.S., May 10, 2017.Mike Blake

NEW YORK (Reuters) - Oil prices settled slightly higher on Friday as lower U.S. crude inventories and increasing support for continued OPEC-led production cuts inspired hope that the global supply glut can be reduced.

Benchmark Brent crude LCOc1 settled up 7 cents at $50.84. U.S. light crude CLc1 was up 1 cent at $47.84.

On Thursday, oil prices rallied as a larger-than-expected weekly draw in U.S. crude inventories C-STK-T-EIA of 5.3 million barrels suggested that output cuts by the Organization of Petroleum Producing Countries (OPEC) and other producers were helping reduce a global glut in crude, analysts said.

OPEC and other producers meet on May 25 to decide whether to extend the output cuts they agreed to last November. Saudi Arabia, OPEC's de facto leader, has said it expects an extension to the end of 2017 or possibly beyond.

Commerzbank said in a note it was skeptical about OPEC's ability to support prices in the long term.

"Owing to the rapid recovery in U.S. oil production, OPEC obviously only has limited influence on prices via supply curbs," it said.

U.S. drillers added oil rigs for the 17th straight week, Baker Hughes data showed on Friday. RIG-OL-USA-BHI. Horizontal rigs, the type most often used to extract oil or gas from shale, rose 8 to 742. Oil rigs rose 9 to 712.

Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016.Nick Oxford/File Photo

U.S. crude production C-OUT-T-EIA has risen more than 10 percent since mid-2016 to more than 9.3 million bpd, close to the levels of top producers Russia and Saudi Arabia.

U.S. output, excluding Alaska, would expand 390,000 bpd from May 2017 to December 2017, assuming a U.S. light crude price of $50, they said.

Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said the market is not just looking at U.S. production figures and U.S. inventory data.

"I think we need to see more normal inventory data across the world. It would be nice to see it get inside a five year range at the very least," he said.

"We got a little bit of a constructive inventory number (this week), but overall the number trends are not that good for where we are in the year," said Colin Davies, Senior Analyst at AB Bernstein.

On Friday the U.S. Commodity Futures Trading Commission (CFTC) said money managers cut their net long U.S. crude futures and options positions in the week to May 9th to their lowest level since November.

Additional reporting by Stephen Eisenhammer in London, Henning Gloystein in Singapore; Editing by Bernadette Baum and David Gregorio